>> this eats into their savings and that is what is going into the savings for the u.s.. >> there is no v-shaped recovery. >> the market has tightened a lot already and they have only done one small 25 basis point rate hike. >> the fed is going to have to decide between two policy mistakes. >> this is "bloomberg surveillance." >> live from new york city for

our audience worldwide, good morning. this is bloomberg surveillance. i am jonathan ferro. futures are up 1%. tom: i am in new york city and it is as much about utility in europe as well. one of those utility bills -- what are they going to be? >> i am not surprised. for europe, 8.1% your headline number in the big lead up to the ecb meeting next week. tom: obviously the ecb has got to do something about this, and over the weekend, lagarde had some real strident language about enough. she had a flag out and she said, enough, that -- let's go. here's the quote.

i am not taking 50 basis point hikes off the table until i see inflation coming down closer to the target. >> and all of a sudden the narrative from last week, which is that the fed is not going to go as far or fast as people thought gets out the window. people say maybe they do meet it and maybe they do go. that is until they get something under control and we get increasingly high inflation print in europe, probably translating to something sustainable. >> last week was quite a big week in gains. it was walking through the countryside of the united kingdom. >> good to have you back, john. still, last week was a big week because you did see a reprieve from seven straight weeks of losses. how do we frame those gains going out? are they a pause, bear market rally, or something different? >> i'm pretty sure that tom has

got different stories than i have. tom: let me show you what this meeting is about today. the language here is hilarious. here the math. this isn't just a recent article. wage growth, 5.6%. inflation, 8.5%. i think that is negative wage growth. does that have to do with this meeting today? >> we have secretary yellen and president biden sitting down with jay powell today. >> this is the first meeting that jay powell has with president biden. is this him being given marching orders to tackle inflation more aggressively, and how much does that compromise the fed who has not been seen as political? that is the tone after a memorial day weekend where people were shocked about the prices they were paying. >> almost five dollars a gallon

on average. tom: john, this language, i want to know if you have ever seen this language in the united kingdom coming off the prime minister's desk. this is off of the treasury secretary's desk about the meeting there talking about and the language of this is really basic. this is american politics as it goes. as we transition from a historic economic recovery to stable and steady growth that works for working families, how's that working? jonathan: that is the problem for the white house. there owning cpi print. there is a fear in that white house that we have not seen the worst of it yet when it comes to confidence and consumers see the downtrend in growth. >> and seeing how quickly it is rolling over. that is problematic, even if it

goes with the mechanical peak. a lot of people don't expect it to come down and inflation might present a real problem in the midterms. >> we get about 0.7% on the s&p. you moved by eight basis points on the 10 year. we speak to the governor and that is a good 10 year. this crude rally continues and we look at this up three point 5%, 119 on wti. lisa: in europe, a bigger gain as we touch a level we have not seen on a closing level going back to 2012 on brent. today, we get a slew of housing data, including housing data which has been at the highest level on record. do we see a deceleration in the pace of price increases on homes given the fact that mortgage rates are crippling the -- of

sales? we are seeing less dynamism in the market and what can the fed do if they are raising rates all the more? 10:00 a.m., john, you are talking about how people are feeling. we get the consumer confidence data. it has been trending lower, although i am finding it interesting that there was upside to friday on the you of michigan survey, economic surprises have been working on downsizing the united states. how much does this indicate a slow down versus people peeling back how quickly inflation is coming off? u.s. president biden's meeting with fed chair jerome powell and secretary treasury janet yellen in the oval office to talk about how to tackle inflation for working america and how much they can talk about the negativity of this when the unemployment rate is near historic lows, when?

you have wage increases? ? how do they dovetail what their plan is when they don't have much control over anything right now when it comes to oil prices or supply chain disruptions? jonathan: looking forward to that. joining us now is christopher marangi from gabelli funds. how do you identify the difference between something that is sustainable? christopher: we have ultimately hit the bottom for the market. they are not necessarily all that ephemeral. they can be quite lasting. we look back at the period of the to thousand's bear market. just six market bear rallies and three of them were over 20%. that is what is painful for people. tom: chris, i want to talk gabelli funds and that is the quality of free cash flows.

has the quality of free cash flow been disrupted? christopher: the quality of earnings perhaps has been over this latest form market, but cash is cash and that is why we look at that metric primarily because we can't fake it. cash flow has been constrained a bit by working capital as of late. that is why we are paying attention to things like lifo and fifo again. with inflation, it matters. lisa: i am trying to recover from tom's exclamation of lifo and fifo. what does this mean in terms of what kind of momentum in earnings we can expect going forward? christopher: the story we see through earnings seasons through the first quarter, the story has been the same over the past year. the consumer is strong, sales are being constrained by an

inability to deliver products to the consumer whether that is through services, goods, or labor. but we are seeing more pressure on margins. we thousand the company's this last -- we saw in the company's this last quarter, and they are still able to pass costs through , but as we reach higher price levels, that becomes more difficult. jonathan: we are seeing price action on simple -- single names anywhere from target to netflix. we have big misses. sometimes they generate 25% moves on a single name on the market. what have you learned there? christopher: some of those misses were companies that didn't have much valuation. they were highly speculative, but you mention some of the retailers. it has been surprising.

you've got to be ready for the opportunities when they present themselves. jonathan: corporate leadership, caught offside by a cycle that's moving so quickly over the last 18 months. people were expecting margin compression. in terms of earnings. how much did they see a surprising how much is it a reality check after a faulty time. how much more can we expect given the fact that quantitative tightening starts wednesday. jonathan: have we fully seen the earnings reset? have we fully realized the earnings reset that many people expected coming into this year. lisa: mike wilson says this is a bear market rally and we have not yet seen the full reset. we are starting to see something

like a by the dip moment. how do you look at a time frame given how quickly the market is moving and the economy as well? jonathan: there is a list of questions -- when can i start buying tech? we get that question all the time? tom: i will go between profit and everything else. everything else has been pounded. jonathan: you said it's a leadership call for attitude adjusting stuff have the cost cuts started yet? tom: i'm getting whispers. in this first section with the three of us back, we get to talk about china. the shanghai relief in the calendar moving into the summer before the party congress

meetings is underplayed this morning. jonathan: it's a factor in the commodity market stop what i saw was fantastic in davos. fantastic for the whole team. did anyone talk about the fact that the last two years, china is still being ignored to this extent? it cannot get into the country to find out what happened with the pandemic? lisa: someone said when you peel back the onion ofdavos, it's china. tom: this is why you watch and listen. they all realized you weren't there, jonathan. jonathan:jonathan: futures are down about 7/10 of 1%, this is bloomberg. ♪

ritika: keeping you up-to-date with news around the world, union leaders have paved away for a package to punish russia and president vladimir putin. they agree to a partial ban on russian oil that would permit certain amounts of crude and oil to come in by sea but that would be a temporary issue that would satisfy hungary. president biden will hold a rare oval office meeting with treasury secretary janet yellen. rising prices are hurting the president. it's just before midterm elections. the number of daily coronavirus cases in china has dropped below 100. still, there are many infections in the tough covid zero response may be temporary.

global news, 24 hours a day and on bloomberg wick take, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

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>> they should be able to finalize a ban on almost 90% of all russian oil imported by the end of the year.

it's an important step forward. the remaining 10% is we will -- will cause us to return to the issue. jonathan: a plan for a ban, the european commission agrees to ban most russian oil. crude is up 3.2% and a big move on brent. wti is up more than 3%. equity futures are down and we are down about 27 wines. tom: it's a churn but with the stunning vix at 25 level coming back to 27 shows a little bit of a tension after the great celebration step the president will meet with the lads from korea this afternoon.

you can sidestep -- jonathan: you need to translate . he will meet with the lads from the inflation lot stuff we talk about janet yellen and powell and biden. help us here, what are they going to talk about? >> i can't imagine what's on the agenda today. i'm getting a kick out of the attention this meeting is generating. i'm pretty sure it's not for you or jonathan or lisa either. we are not going to be talk about 50 versus 75 paces points. we are coming off a long holiday weekend and we are obsessing over uvalde. we were talking about everything except economic issues. look no further than the front page of the washington post this morning. this is what normal people are

reading, u.s. policy makers misjudged inflation threat complete with a timeline that goes back to february, 2021. this is not a news conference or briefing. this is about optics. they -- the reporters will come in and ask a couple of questions and i'm sure the question shouted at the president will be has inflation peaked? these are broad brush strokes for people at home were starting to tune into this. tom: sidestep left to my be. this is chairman howells beat. >> chairman powell is in charge but is biden telling us -- telling the fed what to do? the president has said i'm not get a do with the prior president did which is tweeting directions at the chair of the

federal reserve, i'm not going to try to on the scale. there is a meeting and it will generate photographs for the federal reserve is in regular contact with the white house and the administration. jay powell and janet yellen have a weekly breakfast. they also meet with the council of economic advisers basis. this is a bit rare and is no worthy but it may not be the big news that people are looking for. jonathan: are you saying lisa: they are conflating the meeting because these are photo op? >> there was a lot to be said for that. after the president's schedule over the weekend, speaking at arlington yesterday and meeting in uvalde, this is about hitting the reset button and reminding americans that the white house is paying attention to gas prices and the issues that have them concerned at the kitchen

table. it may not be a market mover. tom: you are spending way too much time in the bill way. middle-class america is getting absolutely crushed by the quality and character of this inflation. lisa: this meeting coming after memorial day weekend is not completely coincidental considering whether people were driving or buying stuff their barbecues, you saw a material difference. perhaps this is just a photo op but how much pressure does this bring for a fed to be aggressive when it's clear they will be the blamed child. joe biden will point the finger at them no matter what happens. >> i don't think it raises the stakes. this is a federal reserve that's already leaning into inflation but in terms of what middle america is concerned about, when you guys were reporting on global wall street indavos, america was mourning the loss of

the kids in uvalde. it took everyone's eyes off every other story. this is the white has getting it back on track and following an agenda where people had to tank up and they have to wonder if they can afford a vacation this summer. tom: i didn't know the lyrics to butter but powell will sidestep right left to my beat. they will not sacrifice the independence of the fed even if janet yellen is the tough guy in the room. >> they will have a bit of a confab, maybe a couple of questions in a couple of photographs and you will see them walk the colonnade but this will not be a new routine where the president tells jay powell what to do with interest rates or browbeat the treasury secretary. they want to look like they are on the same page.

jonathan: thank you, looking forward to radio show weekdays at 5:00 a.m. -- p.m. tom: i take your point that this is about elites who have a cushion against inflation and maybe the lowest of low doing better because the elites need to service them in a broad section in the middle with pew reset -- research doing their research. jonathan: you saw the numbers out of jp morgan. we went through some of them in the last couple of weeks and we could have a cruel summer ahead when it could be a six handle. lisa: many people are thinking

it's increasingly likely with gas prices that even if you get a resolution of the locked in china come a positive for growth for gas prices, if you see some sort of ban in europe, that will be negative in terms of the affordability of guest rises. these things are coming together at a time when it seems like viewers are still fending for themselves. do they want to cramp demand? jonathan: have you ever heard biden, powell and yellen described this way? tom: they are like the beatles. lisa: she can call in. jonathan: futures are down, this is bloomberg. ♪

jonathan: live from new york city this morning, futures are negative, down about 6/10 of 1% .

a massive week of gains after seven weeks losing streak last week. yesterday, one of the fed governors pushing back and you can see that in the bond market. the two year yield is up by about six basis points step surprises from europe and a rally in this one step brent and wti, bank of america called it a sneaky rally. back in early march, brent and wti briefly had 100 30. tom: could take the spot price right now and you can pair it to the moving averages. we have now exceeded a lot of the moving averages since march

of this year. jonathan: and more gains are ahead potentially. it's less about what's happening in europe. china is coming back online. lisa: shanghai is loosening its lockdown and how much is this indicate a softening in zero covid policy? how much is that driving commodity prices? tom: what a joy in london to meet with the jp morgan team. they were just spellbinding on their model of oil. on this meeting today at the white house, the chief, must, i did an extrapolation of a moving average of a gallon of gas in america. on aaa unleaded, we will hit 511

-- $5.11. what does jay powell say to the president to not upset the june meetings and beyond? >> i don't think there is much the fed can tell the white house regarding the allis he asked way. chair powell has been clear they will remain data-dependent but they are focused on inflation. if we see these inflation numbers remain elevated, they will continue with their 50 basis point increase. this meeting is about the white house and president biden being able to convince the american people that he is very much focused on inflation stop by having jay powell come to the white house and having this round table, he is even that perception to the american people that he is putting pressure on the fed to do whatever they need to do to bring in inflation. it gives the appearance of the

white being focus but it's also giving that subtle indication of finger-pointing at the fed that they made a monetary policy mistake and not a fiscal policy mistake. tom: is job formation breaking? are you seeing tea leaves of a labor slowdown? >> not yet, we still saw a very strong april employment report and we expect to still see a solid and positive may employment report as the unemployment rate remains well below what the fed projected at 4%. we are not seeing sideline workers come back online. we are seeing indications of the 11.5 million job vacancies slowly being filled. we are still seeing a record demand for labor and the supply side is falling well short stop we are not yet at a point where we can say the tightness in the labor market is beginning to ease. lisa: are we seeing peak

employment level? >> i know the market is anxious to call it the peak we are still waiting for some of the earlier pressure as the next round of lockdowns that it overseas. it takes months for that to seep into the data so we haven't felt the true and full impact of those earlier policy responses filter down into the numbers. we are taking steps in the right direction and china doesn't seem to be easing some of the protocols. we could see some price relief as we move further into the second half of year but we are waiting the may data. those earlier policy measures will provide upward pressure on prices. some say it matters where the inflation comes from stop lisa: perhaps the fed won't go as hard to crimp demand because they

don't need to create a problem for the labor market and demand to deal with something that largely is considered temporary. is that changing? i >> think the fed is very aware of the fact that the vast majority of race pressure has stemmed from the equation, rendering traditional policy metrics less effective stop as the fed raises the cost of capital, that contempt and consumption. it does nothing to alleviate the price pressures stemming from these supply chain disruptions . for those being exacerbated by international conflict. tom: what is your terminal rate? are you in a lower rate percent of where the fed is heading but do you show a restrictive fed above 4%? >> i think the fed is aware that the u.s. economy is also showing signs of easing and we are already seeing cracks in the armor.

when we look at the consumer, they are still spending but why are they spending and how can they spend? they are now drawing down savings at a market rate. drawing further into the second half of the year, where is that support coming from? it's likely to ease precipitously. the fed has to acknowledge that and i think they are and i think we move into 25 basis points sooner rather than later. tom: i guess that's something that president biden wants to hear. what part of seven or 8% inflation is transitory? do we go back to 5% or the nirvana of 2%? >> the fed is optimistic that they will see lower levels of inflation but they are not forecasting 2% inflation anytime soon. it's about the directional mode -- motivation and they should see a slower price appreciation of the derivative can --

decline. in 2023, that's where the fed is optimistic will see this precipitous downward trend in inflation toward 4% among maybe 3% but getting to that 2% or below will take several years before we get there. lisa: the intention to get inflation down is one reason why mike wilson of morgan stanley think this is a market rally. whatever the fed is doing, it's going in the opposite direction in the fed wants to see a tightening of financial conditions and they don't want to see too much of a rally because that moves in the opposite direction for what they are trying to achieve. do you agree with that? >> the fed is very much focused on financial market stability and not targeting yields but yes, they would like to see the market respond to what the fed has already done.

they have other tools in their toolbelt to continue to push longer rates higher and draw down the balance sheet. they will ramp that up and if they are not comfortable accelerating the pace of breaking reese's, the -- it may not be doable moving into the fourth quarter. they can resort to balance sheet reduction at a faster pace which will provide nice upward rush her to the longer and/or at least provide a floor to longer rates. jonathan: who do i listen to in this market? >> i think at this point, we need to listen to the fed presidents. the policy makers tell us that policymakers are uncertain about the direction of rates. there is a very fruitful debate going on among policy officials as to where the economy is going and where rates will go and

that's going to add volatility to this marketplace. investors need to be aware that there could be some sort of change up in terms of the policy pathway. it's not on a predetermined course. jonathan: thank you. lisa: with last week, the burden just the presiding sentiment is bostwick and now them taking the mainframe. how aggressively can they go to go easy and not hard? tom: it's an incredibly important meeting today. this is a classic photo of a tennis player, alan greenspan in an oval office type meeting. jonathan: you think chairman powell lying down in the oval office? tom: this is vice president

cheney. this is a classic photo of the tennis player alan greenspan working his back. i guess he had a terrible back. jonathan: a difficult moment for this white house. about 15 minutes ago, it's about the optics. tom: it's about the optics, yes, but much more. it's this huge, once-in-a-lifetime crisis we have had three times in 15 years, the great financial crash. we have the pandemic and that we've got a war in ukraine linked into the china lockdown. jonathan: and leadership all over the place. we've seen it from company to company and industry to industry where they are struggling to judge where they need to be down the road for the demand that will exist. tom: someone very good at this will be the secretary of treasury, janet yellen.

she is an expert on modeling out the language of uncertainty to our president. jonathan: futures are down about 17 on the s&p 500. tom: dow futures are down 134. jonathan: i bet you had a good time last week. did you ask for the bank of america year and forecast? does that exist? lisa: he did name check you every time he talked about the down. -- about the dow. jonathan: from new york, this is bloomberg. ♪ ritika: keeping you up-to-date with news around the world, the european union leaders have agreed to back a partial ban on russian oil that would be part of a package of sanctions punishing russia for an greeting just for invading ukraine. it would been petroleum products

delivered by ship but it temporarily allows nations to buy russian oil i the i blind which will get -- russian oil by a pipeline which will get hungary to sign on. food and energy were the big reason for causing a debate at the central bank about how fast interest rates will increase. president biden has set limits as to what he can do about guns. the present cited the texas elementary school and has a new call for congress to crackdown on assault weapons used to carry out the assault. more legal headaches for deutsche bank, they have rated their largest lender. there are accusations of so-called green watching. there have been claims that dws was marketing investment

products that were greener than they actually were. the chelsea football club has an offer of 5.4 billion dollars. the team was put up for sale earlier this year. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

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>> it should be a full energy embargo, oil, coal and gas. before the war, we were 90% russian gas dependent and we are no longer buying any gas from russia and i don't see the white of talking with someone who's just i don't see the point of talking with someone who is committing genocide. jonathan: futures this morning on the s&p look like this. on the nasdaq, darren 1/10 of

1%. -- down. brent proved has a teddy move through 120. you can think governor wallace for some of that move higher. there is an upside surprise in the euro zone on an elation. tom: next thursday for christine lagarde and the jobs report this week might be small. june 1, the first month data we saw, what are you looking for? jonathan: i am looking ahead to payrolls because that's what a lot of people are looking for. the jobs data it will be a focus but that's really dated. if you are looking for job openings to confirm a move by the fed, that it will commit. tom: the housing dated today is

dated as well. it is a joy in it was my book of the summer a few years ago. way out front on china looking out to 2003 and now it is vintage and the author joins us this morning. this is what he does best. this is 10 chapters and nine conflicts and nine chapters on people in the navy and lessons learned of their successes and their failures. i want to fold this into where we are now. i had a conversation davos on the black sea. william halsey without a pearl harbor came back and supported nimitz and the navy under a lot of heat and he went out to sea aggressively. how are we aggressive in a black

sea contained by the bosporus strait? >> the black sea is a russian like. their fleet controls about the good news is that there are nato allies around the black sea including turkey. we have nato warships in the area. united states can flow warships there and we need to look to the sea because of grain and agrarian products bottled up in ukraine. at some point, the international community i believe will have to consider escorting grain tankers in and out of odessa. now they are choked off and that will lead to maximum impact to north africa. we need to open the seas to ukraine. i think that's the next big muscle move. tom: are we measuring risk correctly? in your book, admiral halsey got

a lot of things right and he had a difficult 1944 in the philippines. we are worried about failure like admiral halsey faced. are we overemphasizing failure? >> i think we are not unless you take it to ukraine where you see two risktakers. vladimir putin has rolled the dice and a big way and i don't think it will come out well for him because he has no moral grounding. on the others, you see someone like president zelenskyy who literally is risking it all, his family, his parents, his civilization, his cities, that's pretty motivating and at the end of the day with the tools the west are providing him, his risk calculus will be the correct one. lisa: if vladimir putin is an example of failed leadership, why aren't they move -- losing more quickly? >> they are losing very quickly. three months ago, every

prediction was that they would sweep across the country and conquerkyiv and d cap are -- and decapitate those zelenskyy regime and that hasn't happened. they are back to plan b which is a modest approach in the southeast of the country and they are doing better by comparison than with their failures at the beginning. i would categorize what i see now is a lot of success on the russian side. lisa: it brings us back to the idea of escorting grain ships. how aggressive should the western allies get in the face of dramatic leadership by vladimir putin. is it time to be more aggressive or continue grinding it out? >> the mistake here is to think that is some kind of on and off switch. do we go to war with russia or sit back and let them conquer ukraine?

i think the west has correctly treated it like a dimmer in your dining room and it's cranking it up and taking more risk back to the conversation of taking more risk in prudent ways. when i look at the green shift, it's time to take a look at that. tom: what can anyone from england learn from the power of no and john paul jones. this was a few years ago and mr. jones went over to england and took on britain. what did we learn about the power of no? >> in one word determination and you have a relatively ragtag american army in the 1770's and john paul jones inspires it i fighting from the deck of his ship and defeating another ship. it's an extraordinary story in

which he utters the immortal words and i would argue to anybody that i have not yet begun to fight even when looking defeat in the eye. tom: jonathan ferro says that once a week. jonathan: i was wondering where you were going to take this. thank you very much. you've been talking about it from the big inning of this conflict. tom: this goes back to a cold winter 20 plus years ago in amherst, massachusetts and i read everything i could on russian history. they always look south and they look in every circumstance in the black sea. jonathan: food and energy is at the heart of this conversation. tom: and it really hasn't moved. wheaton corner not popping and they have done better recently. in davos, every conversation circled back to odessa.

that is the focal point right now in terms of the food and the arab spring memories of tunisia -- odessa is the focal point now. jonathan: peter oppenheimer will be joining us soon. futures are negative on the s&p 500, down 18 points. many of you so the comments from governor of the federal reserve talk about higher interest rates which unleashed a selloff in the treasury market. over in europe, more upside to prices, just the wrong kind, inflation heading in the wrong direction. euro-dollar is negative 7/10 of 1%, from new york city, this is bloomberg. ♪

>> consumers have to dip into their savings and that's with saving them in the u.s. >> the consumer is the most important data point here. >> the market has tightened a lot and they've only done one small 25